Mortgage fees have risen by more than 30% in the past year, making loans with low interest rates a poor deal for many borrowers.

In September 2010 the average application and booking fees associated with a two-year fixed-rate mortgage totalled £973, but that has risen to £1,253, according to Moneysupermarket.com.

Application fees have risen most sharply, with the average borrower now paying a typical £939 compared to £699 in September 2010.

Higher fees can muddy the waters for borrowers looking for the cheapest mortgage deals, as these charges often offset the savings made from lower interest rates for those with smaller mortgages.

Leeds building society, for example, has launched one of the lowest ever two-year fixed-rate mortgages, with an interest rate of 1.99%. However, borrowers must pay fees of more than £2,000 to get the loan. These consist of booking and completion fees of £1,999 for loans of less than £500,000 (1% of any loan over this amount) and a redemption (exit) fee of £199.

The trade off between fees and rates means anyone borrowing less than £164,000 with Leeds would be better off with a considerably higher interest rate and a lower fee.

Yorkshire building society, for example, offers a loan with a rate of 2.69% and a total fee of £95 – but for someone wanting to borrow £150,000 it works out at about £600 cheaper over the two years than the Leeds loan.

Clare Francis, mortgage spokesperson at Moneysupermarket, said: "Most people are blinded by rates when it comes to mortgages. A two-year fixed rate at 1.99% initially seems to be an amazing deal, but the two-year fix from Leeds is the perfect example of why you need to look beyond the headline rate."

As well as the application and booking fee, borrowers can be asked to pay a redemption or exit fee, legal and valuation fees and sometimes a fee to release their deeds once the mortgage is paid off.

"There are more mortgage fees now, and certainly more prevalence of upfront non-refundable fees," said David Hollingworth of mortgage brokers London & Country. "However, ironically, the resurgence of £2,000 fees and percentage fees on loans is actually a good thing for borrowers as it means lenders are once again becoming competitive."

He added: "Having more choice is a good thing for consumers, though this can make it a bit more complicated to know what is the best deal."

Although lenders now have to put APRs on their adverts to show borrowers the true cost of a mortgage once fees are taken into account, these rates are calculated over a full 25-year term so do not help borrowers who intend to switch after a special offer period.

Borrowers who do want to compare the short-term costs of several mortgages will need to ask the lenders for information, or do the sums themselves using a mortgage repayment calculator to work out the monthly cost and adding the fees to that.